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29/09/2016

Political concerns mar Turkish Stream project

Energy

Political concerns mar Turkish Stream project

Turkish Stream route, from Russia to European Turkey. [Gazprom]

Turkish concern about over-dependence on Russian energy, and an upcoming election, mean Russia’s plans for a new gas pipeline to Southeastern Europe are unlikely to advance as quickly as Moscow might like, Turkish energy officials said today (11 March).

Facing objections from the European Union, Russia in December abandoned its $40 billion South Stream project which would have been extended under the Black Sea to Bulgaria, and carry up to 63 billion cubic metres (bcm) of gas annually to Europe.

Instead, Russian gas exporter Gazprom said in January it planned to build an undersea gas pipeline with the same capacity to an as-yet unbuilt hub on the Turkish-Greek border by the end of 2016.

But officials in Ankara said that timeframe for the project, known informally as Turkish Stream, was unrealistic.

“The issue is not Turkish Stream alone. This is a whole package for Turkey’s energy needs. We need to be a little bit patient,” Energy Minister Taner Yildiz told Reuters.

Turkey is already heavily dependent on Russia for natural gas. Last year it bought 27.33 bcm of gas through the Blue Stream and West-East pipelines from Russia, equivalent to more than half of its gas imports.

Russian state nuclear company Rosatom is also building Turkey’s first nuclear power plant.

“Russia is very keen, but it’s very likely that (Turkish Stream) will be delayed to at least 2017,” one industry executive said, highlighting lengthy environmental approvals, especially ahead of a June general election.

A second government official said negotiations over the import price for Russian gas were also a factor. Turkey secured a 10.25% discount in late February, but wants more.

By 2017, Turkey’s gas demand is expected to outstrip current contracted import volumes. Supplies from northern Iraq, one alternative, will not come on line before 2018, leaving Ankara little choice but to buy more from Russia.

There are also political concerns.

One Western diplomat in Ankara said the wrangling over Turkish Stream was more about a tussle between Brussels and Moscow over maintaining influence over Turkey.

“People are realising more and more that Russia is a lost cause and that we need to find more allies to the east and south. Turkey is number one,” the diplomat said. “Russia is drawing Turkey into its orbit, and if it’s not stopped now, then it may be too late.” 

Bulgaria consults with Russia over Turkish Stream

Bulgarian Deputy Prime Minister Ivailo Kalfin was in Moscow on 5 March and held talks with Russian deputy PM Alexander Dvorkovich.

Speaking to a small group of journalists in Brussels on 9 March, Kalfin said that his impression was that Moscow had made an irreversible decision that it would supply gas to Europe bypassing Ukraine. It is very likely that the Russian gas would arrive in Turkey, as Moscow insists on keeping the promise it made to Ankara.

In the words of the Bulgarian politicians, Russia has stopped making proposals to the Commission, because it only gets refusals. Therefore Moscow should expect EU member states to propose to the Commission what they would like to do with the new Russian gas in terms of infrastructure.

But it is very likely that Russia will be confronted with the problem of Turkey’s ambitions. Unlike Ukraine, which plays the classical role of a transiting country, Turkey would like to buy the gas from Russia and sell it to the EU. This would considerably increase the political weight of Turkey and make the EU even more dependent on third parties.

It is highly doubtful that such a scenario would be to the taste of all involved, Kalfin said. He said he had told his Russian counterparts that it is in Russia’s interest to bring gas directly to the EU.

Background

South Stream is a Russian-sponsored natural gas pipeline project. As initially planned, the pipeline would run under the Black Sea to Bulgaria, and continue through Serbia with two branches to Bosnia and Herzegovina and to Croatia. From Serbia, the pipeline would cross Hungary and Slovenia before reaching Italy. Its planned capacity was 63 billion cubic metres per year (bcm/y).

The Commission pressured Bulgaria to freeze South Stream, citing breaches to EU law in the intergovernmental agreement for the construction of the pipeline.

>> Read: Barroso warns Bulgaria on South Stream

Sofia was caught off guard by President Vladimir Putin's surprise announcement in December that Russia was abandoning plans for the South Stream pipeline that would have supplied gas to Europe via Bulgaria, while bypassing Ukraine.

>> Read: Russia says it will shift gas transit from Ukraine to Turkey

Commission Vice-President Maroš Šef?ovi? has said that the Russian plan for Turkish Stream was not viable.

>> Read: Šef?ovi?: Turkish Stream ‘will not work’